Swan glows as economy slows

Figures released by the Australian Bureau of statistics showed economic growth crawled to its slowest pace in eight years, rising by just a seasonally-adjusted 0.1 per cent in the September quarter.

This was even weaker than the slim 0.2 per cent increase economists had expected.
   
Gross domestic product (GDP) in the September quarter national accounts showed annual growth was 1.9 per cent.

Despite the grim news Mr Swan was optimistic. 

"This is a positive outcome for Australia, particularly in the context of a global recession," Mr Swan told reporters in Canberra.
   
Mr Swan said the United States, Britain, Germany, Italy, Spain, Japan, Singapore and Hong Kong all recorded negative growth in the three months to September.

"Something like two-thirds of OECD economies are expected to contract in 2009," he said.
   
"So while other economies are contracting, our economy continues to grow."
   
There was more resilience in the Australian economy than in the rest of the world, Mr Swan said.
   

Slow moving

The national accounts showed households were pulling back on spending, with consumption growing by just 0.1 per cent in the quarter as families focussed on rebuilding savings.

New business investment rose by a solid 1.8 per cent in the quarter.
   
Australia could not resist the pull of global forces, Mr Swan said.
   
But there was a range of factors working in the nation's favour, including the government's economic stimulus package, more than $8 billion of which will find its way into the real economy this month.
   
A 300 basis points reduction in interest rates since September, lower petrol prices, and a depreciation in the exchange rate were also helping.
  
Consumer spending - which makes up 60 per cent of domestic demand - was mediocre during the quarter on the back of 12-year high interest rates earlier in the year.
   
The RBA has since slashed interest rates in the face of a global economic slump, cutting the cash rate by 300 basis points to 4.25 per cent in the space of four months.
   
Economists expect the central bank to follow up Tuesday's one percentage point rate cut with a further reduction in February,

Financial markets are pricing in a cash rate trough of below three per cent by mid-2009.